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Potash/Phosphate

Saskatchewan’s history of potash, politics and profit (Regina Leaderpost – September 28, 2013)

http://www.leaderpost.com/index.html

1943: Geological surveys and exploratory drilling reveals that Saskatchewan has one of the largest potash deposits in the world.

1951: First commercial production potash mine is attempted by Western Potash Corporation Limited in the Unity district. Numerous delays and flooding make the project unsuccessful.

1958: Potash is first produced by Potash Company of America (PCA) near Saskatoon. The mine floods the next year and does not return to production until 1965.

1960: 1970: Potash production in Saskatchewan has been continuous since 1962: Ten mines are built in Saskatchewan for less than $300 million by six different companies. Referenced by: company name, location (year of initial production). Potash Company of America, Saskatoon (1958); International Minerals and Chemical Corporation (IMC), Yarbo K-1 (1962); Kalium Chemicals Limited, Belle Plaine (1964);

IMC, Gerald K-2 (1967); Allan Potash Mines, Allan (1968); Duval Corporation of Canada, Saskatoon (1968); Alwinsal Potash of Canada Limited, Guernsey (1968); Central Canada Potash, Colonsay (1969); Cominco Ltd., Vanscoy (1969); Hudson Bay Mining and Smelting Co. Limited, Rocanville (1970).

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China’s potash deal with Russia threatens Canadian profits – by Carrie Tait (Globe and Mail – September 25, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

CALGARY — China has bought a chunk of one of the world’s largest potash producers, giving the Asian country more control over what price it should pay for the fertilizer – a move that could drag down prices for the mineral and eat into profits for Canada’s potash companies.

China Investment Corp., Beijing’s sovereign wealth fund, agreed to acquired a 12.5-per-cent stake in Russia’s OAO Uralkali. The deal – a debt-for-equity exchange between CIC and a company owned by three Russian oligarchs – comes after Uralkali said it intends to break from Belarus Potash Co., the cartel it had with state-owned Belaruskali.

Companies controlled by Beijing have invested billions of dollars as part of an overall strategy to secure energy supplies as well as basic manufacturing and building materials. In Canada, Chinese oil and gas companies, along with CIC, are significant energy players. CIC’s deal with Uralkali fits the recent Chinese model: Invest in resources in order to secure supply and exert some control over prices.

China is the world’s most populous country and largest potash consumer, and its stake in Uralkali could hurt Canada’s fertilizer producers because they could further lose pricing power.

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Potash Shake-Up Takes Toll as Agrium Sees Drop in Sales – by Gerrit De Vynck (Bloomberg News – September 24, 2013)

http://www.bloomberg.com/

Agrium Inc. is the latest North American potash producer to cut its sales forecast as the breakup of the world’s largest marketing bloc for the crop nutrient begins to take its toll.

Agrium, the third-largest North American producer, expects to sell 30 percent less potash in the third quarter and forecast a 64 percent drop in profit from its wholesale fertilizer division, the Calgary-based company said yesterday. U.S.-based Mosaic Co., the second-biggest producer, cut its sales forecast by about 20 percent on Sept. 16.

The two companies form an export group, Canpotex Ltd., with Potash Corp. of Saskatchewan Inc., North America’s biggest producer. Potash Corp. won’t be spared the drop in demand, said Peter Prattas, an analyst at Cantor Fitzgerald LP in Toronto.

“They’re all going to hurt equally given the fact that they’re a collected group,” Prattas said yesterday in a telephone interview.

The potash market has been roiled since OAO Uralkali, the world’s largest producer, announced it had pulled out of an export sales venture with its Belarusian counterpart on July 30.

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A Bitter ‘Fertilizer War’ Gripping Belarus and Russia Is Helping U.S. Farmers – by Andrew E. Kramer (New York Times – September 16, 2013)

http://www.nytimes.com/

MOSCOW — American farmers are getting an unexpected windfall from a contentious fight between Russia and Belarus, a former Soviet splinter state.

The subject of the fight is potash, a fertilizer. The score so far: One imprisoned Russian business executive, the disintegration of a once-effective cartel that kept world potash prices high and political tension between the two countries.

What is being called the “fertilizer war” is the latest of numerous trade and economic spats between Russia and Belarus, whose leaders, though presiding over similar autocratic political systems, do not get along personally, Russian political analysts say. Aleksandr G. Lukashenko, president of Belarus, and Vladimir V. Putin, president of Russia, by most accounts detest each another. Their feelings have spilled over into the fertilizer business.

The potash problem reached a peak on July 30, when Uralkali, the Russian potash company, announced it was withdrawing from an international cartel called the Belarusian Potash Company, or B.P.C., which was created to keep prices high.

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Belarus Leader Hints at Potash Truce – by Lukas I. Alpert (Wall Street Journal – September 19, 2013)

http://online.wsj.com/home-page

Deal Would Involve Returning Executive to Russia for Prosecution

MOSCOW—The president of Belarus hinted for the first time Thursday at a possible resolution in a cross-border fight over potash that has rocked global fertilizer markets, by suggesting he is open to the idea of sending the jailed chief executive of potash miner Uralkali URALL -5.90% back to Russia for prosecution there.

President Alexander Lukashenko’s softened tone comes as people close to the Russian company’s primary owner, Suleiman Kerimov, say the billionaire is in talks with several parties to sell his stake in the company, something the Belarusian government has named as a precondition to any settlement following the collapse of Uralkali’s potash-trading partnership with Belarus.

“There are two options,” Mr. Lukashenko said. “First is a civilized divorce. We are ready for that. If you go, then go, but do not interfere with our work here. We are ready to work on our own.

“The second option would be to continue to work together. For that, the owners must change and new people come in who are interested in producing potash. We are ready to work with them,” the president said.

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Dissolution of an industry cartel leaves Potash Corp shareholders wishing ‘icon’ had sold – by Andrew Coyne (National Post – September 11, 2013)

The National Post is Canada’s second largest national paper.

Three years ago, when Australia’s BHP Billiton came bidding for Potash Corp. of Saskatchewan Inc., opponents of the deal had all of the arguments. A majority of the company’s shareholders may have lived outside Canada, along with its CEO, but nevertheless this was a Canadian icon, a “national champion,” or, if you really wanted to get hard-headed about it, a “strategic asset.”

Why would anyone want to sell a company that controlled 53% of the world’s potash reserves? Why, that is, other than the $130 a share —nearly $40 billion in total — that BHP was offering. But what was such a pittance if it meant pulling PotashCorp out of the Canadian-led global potash cartel, on which the vastly inflated world price of potash depended? Surely any idiot could see the folly in that. And in time, enough idiots did: The federal government, egged on by the government of Saskatchewan, blocked the sale.

At the time, blinkered ideologues like me expressed concern that, in the name of preventing one foreign-owned company from taking over another foreign-owned company, and for the sake of preserving “our” control of a resource that would remain as much owned, taxed and regulated by the province after the sale as before, PotashCorp’s shareholders — including the 49% who were Canadian — had been deprived of the capital gain they could legitimately have expected on the sale.

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From potash powerbroker to Minsk prison, the cost of crossing Belarus – by Polina Devitt (Reuters Canada – September 8, 2013)

http://ca.reuters.com/

MOSCOW (Reuters) – Vladislav Baumgertner has the fluent English, Western business degrees and meteoric career that typify Russia’s young executive elite, but the boss of Uralkali, the world’s largest potash producer, is now more in need of Soviet-era survival skills.

For two weeks Baumgertner, 41, has been held in a dank Stalin-era Belarusian cell, facing up to 10 years in jail on charges of abusing power and seeking gain at the expense of Belarus while chairman of a joint venture cartel, Belarusian Potash Company (BPC), which until last month controlled Russian and Belarusian exports of the fertilizer ingredient.

Belarus, which has long bridled at what it believes is Uralkali’s aim to take over its own producer Belaruskali, was angered by Uralkali’s abrupt exit from BPC last month, a move likely to lower prices, hit a key source of hard currency and hurt Belarus’s rickety economy.

The Belarusian Investigative Committee has not provided details on the charge, though among comments it made at the time of Baumgertner’s arrest are allegations that he and others at BPC provided discounts on product to some buyers without telling the Belarusians, redirected ships to take Uralkali product instead of Belaruskali’s, and cancelled some BPC contracts, promising partners a Uralkali alternative at lower prices.

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Potash prices head for 20 pct drop after cartel disintegrates – by Ron Bousso (Reuters U.S. – September 6, 2013)

http://www.reuters.com/

LONDON, Sept 5 (Reuters) – Potash prices are poised to drop some 20 percent after the surprise breakup of the world’s largest producer cartel sent buyers and sellers scrambling to establish new valuations, traders said.

Global trade in the material – one of three nutrients vital for agriculture – remains largely on ice after Russia’s Uralkali in July quit the partnership Belarusian Potash Co (BPC), which together with a rival North American cartel controlled some 70 percent of the market.

Belarus’ retaliatory arrest of Uralkali’s chief executive Vladislav Baumgertner in Minsk last week further highlighted the deep rift between the Russian and Belarusian producers.

“As a cartel, producers were able to cut supplies in order to control prices. As competitors, producers will reduce prices rapidly to gain business,” an industry source said.

BPC co-founder Belaruskali appears to be particularly keen to secure new supply deals after the split left it with limited global trading infrastructure, which had been dominated by its Russian partner, traders and industry sources said.

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Russia escalates dispute with Belarus after [potash company] CEO’s arrest – by Timothy Heritage (Reuters U.S. – August 30, 2013)

http://www.reuters.com/

MOSCOW – (Reuters) – Russia banned pork imports from Belarus on Friday, stepping up a diplomatic and trade war over the arrest of a Russian businessman and threatening to deepen the isolation of its former Soviet ally.

Russia is one of Belarus’ few diplomatic backers after 19 years of authoritarian rule by President Alexander Lukashenko but has responded furiously to the arrest this week of Vladislav Baumgertner, head of Russian potash company Uralkali.

Baumgertner was seized on Monday at the airport outside the Belarussian capital Minsk after being invited to talks with the prime minister, and then humiliated by television footage showing him being searched in his prison cell.

Since then, Russian officials have announced a 25 percent drop in oil supplies to Belarus in September, threatened to extend the cuts for several months and hinted at possible restrictions on imports of Belarussian dairy products.

Russia’s veterinary regulator said the restrictions on hog and pork product imports had been imposed over concerns about African swine fever in Belarus and would not be lifted until the virus was wiped out or brought under control.

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Russia orders oil cut to Belarus after potash clash – by Dmitry Zhdannikov and Vladimir Soldatkin (Reuters U.S. – August 28, 2013)

http://www.reuters.com/

MOSCOW – (Reuters) – Russia ordered its oil firms on Wednesday to cut supplies to neighboring Belarus by around a quarter, in a major escalation of a trade and diplomatic dispute following the arrest in Minsk of the boss of Russian potash firm.

Trade disputes between Russia and Belarus have affected oil deliveries in the past, causing knock-on disruptions to pipeline flows via Belarus to European countries such as Poland and Germany.

Memories of those cuts, which led to oil price spikes, resurfaced this week after a major diplomatic row erupted between Moscow and Minsk.

Belarus this week detained chief executive of Russia’s Uralkali (URKA.MM), the world’s top potash producer, accusing him of inflicted severe economic damage following the collapse of a Russia-Belarus sales cartel.

Russia demanded the release of Vladislav Baumgertner. Uralkali controls 20 percent of the world market and is partially owned by Suleiman Kerimov, a billionaire with close ties to Russian President Vladimir Putin’s administration.

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Potash Collapse Signals Buy Not Build for Vale: Corporate Brazil – by Juan Pablo Spinetto (Bloomberg News – August 26, 2013)

http://www.bloomberg.com/

Turmoil in the global potash market is creating an opportunity for Vale SA to buy assets at a discount as the mining company leads Brazil’s bid to become self-sufficient in crop nutrients.

Vale, whose output at Brazil’s only potash mine dropped for the past three years, should abandon plans for greenfield projects and consider instead purchasing existing producers or their assets, according to Stifel Nicolaus & Co. Potash companies are trading at a “great discount,” making acquisitions a cheaper option for Vale than starting from scratch, said Terence Ortslan, managing director of research firm TSO & Associates.

Vale suspended two potash projects in Argentina and Canada worth $8.9 billion in the past year as cost increases made the ventures unfeasible. Fertilizer producer shares have slumped 14 percent on average since July 30 when OAO Uralkali ended output restrictions through a venture with Belaruskali, triggering speculation prices would tumble. Their average price-to-book ratio fell to 1.69 yesterday from 2.55 at the end of last year.

“It’s tough to justify the economics of a new project at today’s pricing,” Stifel Nicolaus analyst Paul Massoud said by telephone from Washington.

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Uralkali CEO’s ‘bizarre’ arrest in Belarus will heighten potash tensions, analysts say – by Peter Koven (August 27, 2013)

The National Post is Canada’s second largest national paper.

TORONTO – The potash industry has become engulfed in political intrigue, as a Russian executive at the centre of a cartel-busting plan has been detained by the autocratic government he used to do business with.

OAO Uralkali confirmed on Monday that CEO Vladislav Baumgertner was detained by authorities in Belarus. He is accused of abuse of power, according to reports. The timing is not coincidental.

Just three weeks ago, Uralkali threw the potash market into chaos by dismantling Belarusian Potash Co. (BPC), a cartel-like marketing company controlled by Uralkali and Belaruskali, its state-owned Belarusian counterpart. Uralkali vowed to end its practice of withholding production to prop up prices, prompting speculation that potash prices will fall dramatically. They are already under pressure.

Belarus is very unhappy with this development, but industry experts suggested that this arrest will only push the two sides further apart. It is the most dramatic political intervention in the potash business since Canada rejected the takeover bid for Potash Corp. of Saskatchewan Inc. in 2010. “It is certainly a bizarre development. You’ve got to think Russia and [President] Vladimir Putin will respond,” said Joel Jackson, an analyst at BMO Capital Markets.

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BHP to Pursue Potash Venture on Strong Return Expectation – by Nichola Saminather (Bloomberg News – August 25, 2013)

http://www.businessweek.com/

BHP Billiton Ltd. (BHP), the world’s biggest miner, will proceed with its plans for a Canadian potash project that has been called “misguided” by its biggest shareholder, driven by the prospect of strong investor returns.

“We are continuing on this investment because we strongly believe, and we’ve talked a lot about it with the board, this is going to offer very high returns for shareholders in the decades to come,” Chief Executive Officer Andrew Mackenzie said in an interview yesterday on the Australian Broadcasting Corp.’s ‘Inside Business’ program, according to an e-mailed transcript. “We have the best undeveloped green field mine on offer to the world and what we are doing, we will be prepared to respond very quickly to the market when it’s needed.”

Russia’s OAO Uralkali, the largest potash producer, in July quit a marketing venture with Belarus’s state producer that controlled about 43 percent of global exports and kept limits on production, and signaled prices may fall by as much as a quarter. BHP said Aug. 20 that its projections for the project assume a shift away from the current market dynamic.

Melbourne-based BHP last week said it’s seeking partners for the Jansen project after approving spending of $2.6 billion. The company has been approached and has approached possible purchasers of a stake in the project, Mackenzie said then. Jansen may cost $16 billion to build, Citigroup Inc. said last month.

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The Great Potash Power Play – by Gabe Collins (The Diplomat – August 23, 2013)

http://thediplomat.com/

Potash is perhaps the world’s most strategic fertilizer. Mineable deposits are concentrated in a handful of countries, it cannot be synthesized, and crop yields suffer badly without it.

Russia-based Uralkali, the world’s largest potash producer, turned the global potash market on its head when it announced in late July 2013 it would market potash independently and stop selling through the Belarus Potash Company (“BPC”) marketing structure it previously used to coordinate exports and production.

Prior to Uralkali’s move, two major global marketers—BPC and Canada’s Canpotex—controlled around 70% of potash volume traded worldwide, which helped constrain supply and keep prices high.

Uralkali aims to boost its market share in China, where it is estimated that each 10 kilos of pork consumed requires 1 kilo of potash to produce, since Chinese pigs are increasingly fed with potash-hungry corn and soybeans. Similarly, every 44kg of rice eaten in China is thought to require 1 kg of potash to grow, with application intensity likely to rise in the year to come as China runs short of arable land and seeks to produce more grain from a static land area. Uralkali exported approximately 2 million tons of potash to China in 2012—primarily by rail—and now wants to increase this to 2.5 million tons per year, approximately 22% of China’s forecast 2013 potash demand.

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In aftermath of cartel break-up, potash prices slide – by Brent Jang (Globe and Mail – August 23, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER – Spot prices for Canada’s potash exports may have eased, an indication of a softer market following the breakup of a Russian-Belarusian industry oligopoly last month.

Prices for spot shipments of the crop nutrient from Port Metro Vancouver recently slipped $20 (U.S.) to less than $400 a tonne, while there are preliminary signs of market softness elsewhere, including slightly discounted potash prices on rail shipments to China, Patricia Mohr, vice-president and commodity market specialist at Bank of Nova Scotia, said in an interview Thursday.

Russia’s OAO Uralkali announced on July 30 it was abandoning Belarusian Potash Co., a joint venture with rival Belaruskali of Belarus and one of the two largest marketing groups for potash, a mineral used on farms to boost crop yields. Analysts have warned that increased competition following the breakup would lower potash prices by late 2013.

“We can’t be too precise about forecasts because there are a variety of different kinds of prices to different buyers, and some of them are spot and some of them are contract,” Ms. Mohr said. However, she added that the stage has been set for lower potash prices over the next six months, perhaps trading around $350 a tonne in early 2014.

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